9911796707
TMI Blog1982 (4) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... t is made by the firm to the partner of the firm ? " Assessee is a partnership firm consisting of the following partners : 1. Shri Gokulchand (Individual). 2. Shri Shantilal (karta of his HUF). 3. Shri Kantilal (karta of his HUF). 4. Shri Gajendrakumar (karta of his HUF). 5. Shri Mansukhlal. These partners contributed capital to the firm which was credited in their separate accounts. Besides, they advanced loans to the firms purporting to be in their individual capacities and credited separately. In this behalf they were paid interest in accounting years relevant to the assessment years 1975-76 and 1976-77 as follows : Asstt. Year Asstt. Year 1975-76 1976-77 Rs. Rs. Gokulchand (HUF) 1,497 2,266 Shantilal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved earlier, Gokulchand had joined the firm in his individual capacity while interest was paid to him representing his HUF. Learned counsel contended that the interest paid to a partner in his individual capacity may be hit by s. 40(b) of the Act but when a person becomes partner in an individual capacity and the interest is paid to his HUF, s. 40(b) will not be applicable. For this proposition he relied on CIT v. Sajjanraj Divanchand [1980] 126 ITR 654 (Guj), Terla Veeraiah v. CIT [1979] 120 ITR 502 (AP) and CIT v. K. Krishnaiah Chetty Sons [1981] 131 ITR 410 (AP). There is apparently a conflict of views on this question. The Andhra Pradesh High Court itself in CIT v. T. Veeraiah and K. Narasimhulu [1977] 106 ITR 283 and Addl. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest, commission, salary, bonus or remuneration. It does not make any distinction in respect of the character of or capacity in which the payment is made to the partner." The conclusion of the court was that interest paid by the firm to the partners, either on the amounts brought by them from the respective HUFs or on amounts brought in their individual capacity, was in either case a case of interest (paid) to the partners and such payments were not allowable in view of s. 40(b) of the Act. We respectfully agree with the reasoning of the Allahabad High Court. The Allahabad High Court clearly dissented from the view taken by the Andhra Pradesh in Addl. CIT v. Vallamkonda Chinna Balaiah Chetty and Co. [1977] 106 ITR 556, which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
